Congressman has bill ready to give FTC veto on ISP data caps

New York Representative Eric Massa, responding to his district's outrage at …

Congressman Eric Massa represents a district in western New York that's exquisitely sensitive to the current US broadband market. On the phone side, the area, which includes the city of Rochester, is served by Frontier Communications, which shows no indication that it will follow Verizon in offering fiber to the home, while its DSL terms of service suggest that 5GB per month is appropriate usage. On the cable side of the service duopoly, Time Warner used the area as a test market for its brief flirtation with widespread usage caps. At the time, Massa promised to respond to his constituents' outrage by introducing legislation that would regulate the imposition of usage caps; that bill is now ready. It would treat ISPs like utilities, and put the Federal Trade Commission in the role of Public Utilities Commission, ensuring that the service providers had an economic case for imposing usage-based fees.

In making the case for regulation, the bill brings together a few strands of thought that are becoming increasingly common in discussions of the role of government in fostering the development of the Internet. In short, the Internet has become essential for a variety of basic functions—the bill specifically mentions its use for "agricultural, medical, educational, environmental, library, and nonprofit purposes"—making access part of the basic infrastructure. There's also an economic case to be made for broadband, since it allows more sophisticated services and commerce to take place online.

In a press conference today, Massa reiterated both of these, saying that "volume-based pricing is detrimental to our economy," and highlighting how doctors who tried to work from home could have been hit hard by the usage fees. "I became aware of this issue when Rochester doctors said it would have a catastrophic impact," he said. "They rely on broadband for their professional work, and pricing would triple their bill."

The bill recognizes that the US broadband system, which has created a cable/phone duopoly, hasn't fostered a competitive market; Massa explicitly called ISPs monopolistic. Since everyone with a fat enough pipe into the home is now also offering television programming, this position allows them to take anticompetitive actions, leveraging the Internet monopoly to further their video offerings. The bill explicitly suggests that, by making high-traffic activities expensive, ISPs will stifle the use of online video, and force consumers into paying for their traditional television services.

The lack of broadband competition hits consumers in the pocketbook
Data source: Pew Internet & American Life Project April 2009 Survey

Put it together, and you have a rather strong statement about usage caps: "Volume usage charges for broadband Internet access that are substantially above cost in a market without sufficient competition constitute an unfair and unconscionable practice, as substantially above-cost pricing has anti-competitive and anti-consumer effects on Internet use." Massa says that, as he's worked on drafting the bill, he's already been approached by lobbyists, warned by senior colleagues, and expects that he'll "be burned in Internet effigy."

Massa's solution would be to force ISPs to justify usage-based fees to the FTC before they are implemented. The ISP would have to submit an economic case, based on the capital equipment cost and operational costs, for why they need to charge for usage, and then consider the impact of those fees on users. The FTC would get injunction power, and the ability to fine any ISP that either neglected to file a justification or implemented the plan regardless of the injunction. The bill uses language like "unjust, unreasonable, or unreasonably discriminatory" to describe plans that run afoul of the economic analysis, which Massa says reflects existing statutory language used giving the FTC regulatory power.

It's safe to assume Time Warner won't like this one bit, as a basic economic analysis shows that its plan imposes fees that are nowhere close to those of its fellow duopolists. More generally, the cost of supporting subscribers appears to be dropping in most cases, so it seems unlikely that anyone in the industry would be able to get their plan past the FTC.

All of that suggests that opposition to the bill might be ferocious, and Massa will need all the help he can get. By his own admission, he's "a very improbable candidate for this cause—when something goes wrong with my computer, I turn to my teenage child." Still, he feels that outrage regarding the usage caps is widespread, and that will eventually drive other Representatives to join him as cosponsors of the bill.